Finance Minister Enoch Godongwana says his third budget will include thorough consultations with all political parties in the GNU, and he will also first seek approval from the Cabinet before presenting it in Parliament.
Godongwana will deliver his new budget on 21 May after his previous two attempts were scuppered.
The Minister never got the opportunity to deliver his first budget speech, on 19 February, which included a 2% VAT hike.
His speech was cancelled after GNU members indicated at a Cabinet meeting earlier that day that they would not accept the budget.
READ: Budget postponement: GNU partners flex their muscles
The second iteration of the budget, on 12 March, which included a 1% VAT hike over two years, was the subject of a highly contentious process to pass it in Parliament, followed by a court case which resulted in its withdrawal.
The Parliamentary budget process was highly controversial and was only pushed through after smaller parties supported the ANC.
READ: Helen Zille: DA’s court challenge forced Godongwana to retreat on VAT
For Budget 3.0 Godongwana will have to tread carefully, with the ANC now learning that it cannot take unilateral decisions.
Treasury has meanwhile assured South Africans that until the new budget is passed, government services will continue to be funded.
Under section 29 of the Public Finance Management Act, spending of up to 45% of last year’s budget during the first four months, and up to 10 per cent for each month after that, is allowed.
Funding for provinces and municipalities will continue under the 2024 Act, allowing transfers of up to 45% of their allocated funds.
“While the postponement of the budget’s passage is not ideal, the circumstances leading to this decision have highlighted the importance of meaningful engagement on fiscal matters.”
Treasury is now developing a new fiscal framework that will include:
- Revising economic assumptions using the latest available data
- Generating updated fiscal projects
- Recalculating revenue projections and tax implications
- Determining appropriate borrowing strategies
- Consolidating these elements into a coherent and sustainable fiscal framework
Economic growth is likely to be revised down, while government may have to cut spending, in light of the VAT increase being scrapped. That left the National Treasury with a R75 billion shortfall to plug over the next three years.
It is unlikely that a different type of tax, like an increase in corporate tax, will be accepted.
Godongwana has commited to transparent communication throughout this process.
“We owe it to the hardworking citizens of South Africans to be open and transparent about how tax money is spent.”
